Deal talk lifts Centrica, RSA shares

Regus tumbles on plan to buy U.S. office services group

LONDON (CBS.MW) -- Deal talk was the focus of London markets Monday, as Centrica and Royal & Sun Alliance confirmed they were in talks to sell off divisions, while office group Regus said it was close to buying a U.S. peer.

But most U.K. stocks drifted on Monday amid light newsflow and tensions in Iran over three allegedly captured British vessels. See story on Iran-U.K. dispute.

Of movers in London, gas group Centrica (CNA) rose 2.3 percent after confirming it was in talks to sell the Automobile Association, a car breakdown and insurance group. The unit could fetch 1.5 billion pounds ($2.7 billion), and Aviva (AV) already has taken a look at the group, the Independent newspaper said Monday.

Insurer Royal & Sun Alliance (RSA)
RSA, +0.16%
added 3.7 percent after it announced it's in talks to sell its U.K. life insurance operations, calling the discussions "early stage". The Financial Times Saturday reported a group of investors led by Resolution Life Group offered 900 million pounds ($1.6 billion) for the business. RSA said Monday that "the amounts referred to in the press are purely speculative."

Britain's office services group Regus (RGU) dropped 3.1 percent after it confirmed it's in talks to buy U.S. group HQ Global Workplaces at a possible cost, including expenses, of up to 190 million pounds ($350 million). Regus said it's "considering a range of proposals in respect of financing for the potential acquisition."

British music group EMI (EMI) edged 0.1 percent lower amid a report it is to reopen merger talks with Warner Music Group, the Times (of London) reported Monday, citing sources. The talks were expected to be rekindled after European antitrust regulators backed the $6 billion proposed merger of Sony Music and BMG, as EMI and Warner Music were surprised by the ease with which BMG and Sony gained EU approval.

EMI shares gained last week on deal speculation in London after Brussels indicated it would back the Sony-BMG deal.

And magazine seller WH Smith (SMWH) fell 1.5 percent to 323p per share, on weekend reports that private equity group Permira will slash its bid due to a shortfall in the company's pension fund. The Mail on Sunday said the indicated bid of 375p per share will fall to 330p, while the Sunday Express said the bid will fall to 340p.

More broadly, the FTSE 100 index (1805550) eased 0.1 percent at 4,502, while European markets also closed weaker. See European markets.

The largest U.K. company to update on performance Monday, bank Lloyds TSB (LLOY)
LYG, +2.33%
trimmed losses to only 0.1 percent after a weak start to the week. The bank said it remains "well positioned" to meet expectations for improved growth in the second half of 2004. In retail banking, Lloyds noted "some slowdown in the demand for consumer credit." The retail bank grew market share in its core markets "particularly in mortgage and credit card lending, albeit with some expected margin erosion."

"Overall company is not trying to steer consensus away from 41.5p of earnings in 2004E. So in-line numbers, but share price needed to see real signs of progress to hold onto recent gains," said Deutsche Bank in a note to clients.

Mobile operator Vodafone (VOD)
VOD, -1.40%
eased 1 percent, continuing its recent sluggishness on concerns over its Japan unit. Vodafone and peer Mmo2 (OOM)
OOM
also were weaker amid concerns over price competition in the U.K. market due to the 3 service from Hutchison Whampoa.

Dixons (DXNS) firmed 0.9 percent on a report the electronics retailer is considering a 250 million pound share buyback.

AstraZeneca (AZN)
AZN, +0.56%
turned 0.4 percent higher after a weak start. The pharmaceutical launched its Exanta anti-coagulant in Germany, the first launch of the drug yet to be approved in the U.S.

The drug, which is a competitor to rat poison warfarin, is indicated for the prevention of venous thromboembolic events (VTE) in elective hip or knee replacement surgery.

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